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Asia malaise cuts server growth

Weakened Asian currencies will cut into sales growth for high-end servers, according to a new survey.

Weakened Asian currencies will cut into sales growth for expensive, high-end servers for use in large enterprises, according to a new International Data Corporation (IDC) survey released today.

IDC says that the market for high-end servers costing $1 million or more declined slightly to $16.94 billion from $17.67 billion in 1996, in part due to sliding currency exchange rates for the Japanese yen.

Vendors like IBM (IBM), Sun Microsystems (SUNW), Hitachi, and Fujitsu will see the overall market grow at an annual rate of three percent through 2001, according to the report.

Unix servers in this market segment will experience the highest growth, with Sun's Ultra Enterprise 10000 as well as IBM systems increasingly used for data warehousing and local area networking applications, IDC says. One vendor showing weakness is Fujitsu, which lost market share as it transitioned to new products; Hitachi also posted weaker results in high-end servers as a result of turmoil in the Japanese market.

In the market for servers costing between $100,000 and $999,000, which IDC calls the "mid-range" market, revenues grew by two percent to $16.9 billion in 1997 on a year-to-year basis. Growth was aided by the need for servers that can process information on a continuous basis without downtime. One such market comprises telecommunications providers who use the systems for cellular and paging services.

The difficulty of switching applications over to less expensive servers has also helped stabilize the midrange market, IDC says.

IBM and Hewlett-Packard (HWP) are still the largest players in the midrange segment, with the two companies accounting for 36 percent and 13 percent of the market revenue, respectively. HP, in particular, saw a significant six percent growth in business to $2.2 billion, IDC estimates. Silicon Graphics, which again was battered by losses in 1997 and is now looking for a new CEO, grew its midrange server business by 31 percent to $800 million, the report says.